National Association of Home Builders Discusses Economics and Housing Policy

Strong Owner Household Formation Brings Homeownership Rate Up

The U.S. homeownership rate stands at 64.2% in the fourth quarter 2017, up from 63.7% a year ago and 63.9% last quarter, according to the Census Bureau’s Housing Vacancy Survey (HVS). After dropping to a cycle low of 62.9% in the second quarter 2016, the national homeownership rate seems to be on a sustainable upward trend now. Compared to the peak of 69.2% in 2004, the homeownership rate is still below by 5%.

The homeownership rates of young adults ages less than 35 and 35-44 increased over the last year. The homeownership rates of millennials, mostly the first-time homebuyers, registered the largest gains among all age groups, from 34.7% to 36%. It suggests that millennials are gradually returning to the housing market. Households ages 35-44 experienced a modest 0.2% increase from 58.7% to 58.9%.

The nonseasonally adjusted homeowner vacancy rate remained low at 1.6% in the fourth quarter 2017, down by 0.2% from previous year and statistically not different from the rate in the second quarter. At the same time, the national rental vacancy rate declined to 6.9%, down by 0.6% from last quarter.

The HVS also provides a timely measure of household formations – the key driver of housing demand. Although it is not perfectly consistent with other Census Bureau surveys (Current Population Survey’s March ASEC, American Community Survey, and Decennial Census), the HVS remains a useful source of relatively real-time data.

The housing stock-based HVS revealed that the number of households increased to 120.2 million in the fourth quarter of 2017, 1.4 million higher than a year ago. The gains are largely due to strong owner household formation. Indeed, the number of homeowner households has been rising since the third quarter 2016, while the number of renter households has been on the downward trend. In 2017, the number of homeowners increased by 1.5 million, while the number of renter households declined by 76,000.